Why shrink wrap software won't die

Tangible assets

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Remember how the 'weightless digital economy' was supposed to make shrink wrap retail software as extinct as the dodo? Only a bozo would want to pay a premium for manual and a box.

But shrink wrap isn't dead. Software publisher Avanquest, the new umbrella name for US-based publisher Elibrium, which owns major publishers in France, Germany, the United Kingdom (Guildsoft and MediaGold) and South Africa, saw sales rise 20 per cent last year, and expects 15 to 20 per cent this year.

How can this be so? It turns out people really do like buying something tangible, while for developers who don't want to be deluged in paperwork or start an empire, the model provides a steady royalty stream. Christine Seeleye, CEO of Avanquest USA, told us that retailers like boxed software too, because it provides a healthier margin than the big software companies.

Avanquest offers a software developer everything from localization to marketing and support. In the US, it does almost all of its business in the retail channel right into the big five, which includes CompUSA, Office Depot, Circuit City and Best Buy. In the UK the mix includes more catalogs, while in France almost half of the revenue is from corporate licensing. The Internet accounts for about ten per cent of global business.

We were curious what Seeleye thought of in-store burners. CompUSA has launched about 200 of these in its stores, which allow the punter to choose software and collect a CD at checkout.

"The people who'll browse will browse from home," she reckoned. "It would make more sense at a McDonalds or an Internet Cafe - and you still don't get a manual." Office Depot had planned a similar scheme but abandoned it before launch.

Software authors receive royalties of between 15 and 20 per cent of the sticker price, and the sweet spot is for developers grossing under $5m a year. Avanquest rejects about 50 titles a month, says the CEO, as many are "me-too" products. While some of the publisher's offerings include complex software which demands a hefty manual, not all of them are so complex - and yet there's a strong demand for buyers to carry home a tangible asset. It doesn't look shrink wrap is going away any time soon. ®